The 5 Components Of The Retail Leverage Factor:
1. Overall Size of Business of Vendor to Retailer
2. Growth Categories of Participation with the Retailer:
3. Innovation Level of Company
4. Margin Dollars and Rate Given to Retailer
5. Consignment or Other Retailer-Incented Sell Through Incentives

I never pass up a good analogy to help myself understand a complicated story, and spice up a boring one. The growing use of private brands (or private label) by retailers has become the key story of this new era in retail marketing. There are so many different stories and perspectives floating around, I think what gets lost in the buzz is the underlying reason of why retailers have turned to private brands. So what does retailer’s private brand strategy have to do with the NFL?

So the rumor is out there – Radio Shack could be on the market, and Best Buy’s name has been tossed out as a suitor – we wanted to share our perspective on what it could mean. Best Buy and other retailers are known to be taking learnings from European Retail and applying them in the US. Best Buy’s own acquisition of Carphone Warehouse in the UK in 2008 could serve as a model for a potential acquisition of Radio Shack. While there are approximately 61 Best Buy Mobile stand alone stores in the US today, there are over 6,000 Radio Shack locations when you combine company owned stores, franchies, and wireless kiosks.

SUMMARY:
It started with Tivo’s announcement of a marketing partnership with Best Buy last July, and gained steam with Walmart’s recent acquisition of VuDu, and escalates with Tivo’s new big news on March 2nd. The next big battle in Consumer Electronics and TV’s is coming closer.

The reason I share this article with you is that you don’t have to be selling TVs or set top boxes to walk away with ideas that you can apply in your own brand/business.

HOW CAN YOU ADVANTAGE A PARTICULAR RETAILER?

The key lesson here in the pursuit of Retail Leverage is to ask (and answer) the question – “How can I advantage a particular retailer versus their competition?” Get over the battle you are fighting against other brands – THE RETAILER DOESN’T CARE. The real story is the retailers fight against each other.

While the STAINMASTER brand has considerable equity in the home furnishings and flooring industries, the team at INVISTA was able to gain distribution at the world’s second largest DIY/Hardware chain by thinking like a challenger brand and adopting two key strategies to gain Retail Leverage.

In order to effectively compete, challenger brands must learn to package innovative product offerings together with marketing programs designed to represent at least one of the following four forms of retailer financial growth:

FOUR WAYS TO OFFER RETAILERS FINANCIAL GROWTH:
1. Increase overall category demand
2. Increase the attach-rate of high-value complimentary items
3. Motivate a “trade-up” within the category
4. Help a given retailer win the war against another retailer

The most difficult thing for brands like Glad and Hefty is viewing themselves as challenger brands when their histories have been more reflective of the rare “power” brand.

I found a great resource that fills in the blanks on Circuit City’s demise from a person I follow on twitter, @DonEames . He is a former Senior VP of Best Buy, and now has his own management consulting company. Even though he was inside the key rival of Circuit City, I believe he had front row seats to the demise. His analysis would be politically tough for a Circuit City insider to provide, especially given the it was just a year ago that the final stores shuttered.

Check it out – it is called “CIRCUIT CITY SIX: Six Fatal Mistakes of a Once “Good to Great” Company”. It is a quick and to the point read. I found it to provide valuable insight to both retailers and brands alike, and for that matter, consumers who used to shop there (or avoid it).

Who wants to be the first to admit they don’t have the answer to a problem? What do you do when your product is becoming a commodity, and even worse, when others start giving it away for free?

Garmin, the maker of GPS systems, is getting hit with this double-whammy. The majority of their problems center on their Automotive/Mobile business segment, which includes the main product that comes to mind for Garmin, the portable GPS for your car. Just as Tivo has watched the cable / satellite companies erode their share with generic DVR’s, smart phones are poised to erode the stand-alone portable GPS business.

WHERE DOES GARMIN GO FROM HERE?

The central question for Retail Leverage and our readers is “What can Garmin do to gain Retail Leverage with its nüvifone line?”

Coke’s Freestyle system hits on several of our 5 points in how to gain Retail Leverage.

#1 Have The Hot Product With No Substitutes
#3 Be A Top Revenue Vendor

TAKEAWAYS FOR ANY MARKETER:

No matter how big your brand is, you still need Retail Leverage
If they big guys need leverage, what does that say about the smaller challenger brands?
Figure out what you have to exploit that others don’t and leverage it.
If you don’t have something unique / different / better, then be prepared to move to the 6th, rarely spoken of, painful way to get Retail Leverage: Price.

Coke and Costco are about to find out, together, who has retail leverage in this relationship. The only question is how long will it take? One party will eventually have to make concessions, or more concessions than the other guy, and for those of us keeping score at home, it should be obvious who the winner is.

Think about other categories. At its most basic form, Retail Leverage comes down to who needs who more.